Income Tax Appellate Tribunal - Mumbai
Deputy Commissioner Of Income Tax vs Royal Metal Printers (P) Ltd. on 8 October, 2003
Equivalent citations: (2005)93TTJ(MUM)119
ORDER
H.S. Sidhu, J.M.
1. The Revenue has filed the present appeal against the order of the CIT(A)-XV, Mumbai, dt. 27th Feb., 1996, for asst. yr. 1991-92, on the following ground :
"On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in cancelling the penalty imposed under Section 271(1)(c) amounting to Rs. 7,74,312."
The assessee has filed return of income on 23rd Dec, 1991, declaring loss of Rs. 8,26,109. A survey action under Section 133A was undertaken for the limited purpose of checking the installation of stenter machine purchased from M/s Gujarat Stenmech (P) Ltd. The machine was dispatched to the assessee on 28th March, 1991. As the machine was 30-40 ft. long, there was suspicion that the machine could not be installed and put to use before 31st March, 1991, as it required special foundation for installation. During the survey under Section 133A, Shri M.K. Agarwal, director, in his statement under Section 131, stated that the depreciation on this machine was inadvertently claimed which they were now offering for taxation. To this effect, the assessee filed revised return declaring income of Rs. 5,20,522 on 30th July, 1992, which resulted in an increase of Rs. 13,46,631 in income. The assessment was completed on the income of Rs. 5,20,522.
2. On the ground that the assessee had furnished inaccurate particulars of income, penalty proceedings under Section 271(1)(c) were initiated. In response to the show-cause notice, the assessee replied vide its letter dt. 24th Feb., 1993, that "they were under the impression that depreciation can be claimed on plant and machinery acquired during the year and, therefore, depreciation on plant and machinery purchased during the year was inadvertently claimed and since this position was clarified by your goodself, we have revised the return and paid the income-tax thereon on our own." From this, the AO concluded that the assessee had claimed depreciation on plant and machinery wrongly resulting into concealment of income of Rs. 13,46,631. Since the assessee had filed revised return and paid taxes thereon immediately, he took a lenient view and imposed a penalty of Rs.7,74,312 under Section 271(1)(c). On appeal by the assessee, the CIT(A) cancelled the penalty. He held that the AO had reached the conclusion regarding concealment on the basis of surmises, conjectures and suspicion, that the claim of depreciation in respect of stenter machine in the original return could not be regarded as a false or fraudulent claim and that the AO had not brought on record any material or evidence to support the imposition of penalty. He also held that the director of the company had made the offer in regard to claim of depreciation voluntarily. He also referred to the guidelines laid down by various rulings of the Supreme Court and High Courts cited by the assessee before him. He finally held that the penalty was not sustainable on facts or in law. Hence, the Revenue has filed the present appeal.
3. The learned Departmental Representative contended that the CIT(A) had erred in cancelling the penalty imposed by the AO. He pointed out that the director had during the survey admitted that depreciation on the stenter machine had been wrongly claimed. He argued that the assessee had filed inaccurate particulars of income and, therefore, the AO was justified in imposing the penalty under Section 271(1)(c). He, therefore, contended that the penalty order passed by the AO should be restored.
4. On the other hand, the learned Authorised Representative of the assessee filed a paper book containing 51 pages of various documents such as original computation of income, revised computation of income, audited balance sheet and P&L a/c, statement dt. 9th July, 1992, made by the director, copy of the bill in respect of the stenter machine, note on installation of plant and machinery, etc. He stated that the machine in question had been installed and put to use during the relevant year but since the assessee had not kept the documental records for user of the said machinery, the assessee voluntarily revised the return and paid taxes on the revised income to avoid litigation and to buy peace. He further stated that the assessee had explained to the AO that the stenter machine is an "assembly of various chambers which was delivered during 22nd March, 1991 to 28th March, 1991, by a number of trucks in pre-assembled form, that the assessee had kept the foundation ready and the chambers were fixed on foundation by the maintenance staff of the company as soon as it was received at the factory and that the last truckload was received on 28th March, 1991, by which time the earlier chambers of the machine had already been installed. He contended that the assessee had produced various challans, lorry receipts, octroi receipts and proof of installation expenses, etc., and the suspicion of the AO regarding installation is without any basis. The AO could not establish anything contrary to the assessee's submissions. He also referred to various judicial decisions and stated that though the assessee may not have used the machinery during the relevant year, but if the same was ready to be used, depreciation should not be disallowed. He further argued that the AO had totally disregarded the facts and the circumstances in which the assessee had agreed to revise the return. In support of his submissions, he drew our attention towards the statement under Section 131 of the IT Act, 1961, from Shri Mahendra Agarwal, director, on 9th July, 1992, which is at pp. 25 to 28 of the paper book. He finally stated that the imposition of the penalty in dispute was not justified since the assessee had acted in good faith while agreeing for revising the return of income and surrendered the claim of depreciation voluntarily on the understanding given by the Department that the assessee will not be liable for penalty and prosecution under the IT Act, 1961, and no incriminating evidence had been found against the assessee. He, therefore, argued that the CIT(A) had rightly cancelled the penalty under Section 271(1)(c).
5. We have heard both sides and perused the orders passed by the Revenue authorities and the material placed before us in the paper book filed by the learned Authorized Representative of the assessee. From the facts of the present case, it appears that the assessee had purchased one "Five chamber high efficiency close circuit pin type stenter machine" from Gujarat Stenmech (P) Ltd. which was dispatched by the seller under invoice dt. 28th March, 1991, for a total cost of Rs. 16,57,501 inclusive of excise duty. The lorry receipts, delivery challans, etc. furnished by the assessee show that the different chambers of the machine were dispatched during 22nd March, 1991 to 29th March, 1991, and the main and bigger parts which were dispatched first were received by the assessee on the same day. All the chambers of the stenter and connected parts were received at the factory of the assessee by 29th March, 1991. The claim of depreciation in respect of the stenter machine in the original return cannot, therefore, be regarded as a false or fraudulent claim. The AO mainly relied on the fact that the assessee filed revised return withdrawing the depreciation on the stenter machine after survey operation. In the case of Bangalore Steel Distributors v. ITO (1995) 124 Taxation 94 (Bang)(Trib), the Bangalore Bench of the Tribunal has held that penalty for concealment is not leviable in case of revised return filed after survey operation in the absence of anything incriminating found against the assessee in the survey. In the present case, the AO has not brought on record any material or evidence on the basis of which it could be concluded that the assessee had concealed income or furnished inaccurate particulars of income. As rightly observed by the CIT(A), the finding of the AO had been reached on the facts which are available on record. Penalty and assessment are two distinct proceedings. Though additions made in the assessment order constitute material for the purpose of penalty proceedings, for the imposition of penalty, the AO is required to bring cogent material on record on the basis of which it could be established that the assessee had concealed the particulars of income or had furnished inaccurate particulars of income. No such material has been brought on record to justify the imposition of penalty under Section 271(1)(c) in the present case. Keeping in view the facts and circumstances of the present case, we are of the considered opinion that no interference is called for in the well reasoned order passed by the CIT(A) cancelling the penalty in dispute. Accordingly, we uphold the impugned order.
6. In the result, the appeal filed by the Revenue is dismissed.